Run the contractual ceiling as a second case
The rate resets while the balance is still high
Start with the current rate and payment assumptions, then enter a higher rate permitted by the contract. Compare the payment change with available monthly margin. Repeat at the lifetime cap if relevant, and review the note for timing, floors, negative-amortization or payment-cap rules this simplified model cannot reproduce.
The payment sensitivity created by a rate reset
Measure payment sensitivity to a selected higher interest rate.
Find the index, margin, caps and reset dates
- Current balance and remaining amortization term
- Current index, margin and rate
- Periodic and lifetime rate caps
- Adjustment dates and any payment cap or floor
Hold balance and term steady while changing rate
Use the current balance and remaining term.
Enter a plausible stressed rate.
Compare with contractual caps and maximum payment.
Compare the increase with actual monthly margin
The change isolates rate sensitivity and assumes full amortization over the entered term.
Fixed vs. Variable Interest Rates: A Stress-Tested Comparison covers the controlling document terms and questions outside this result.
Variable-rate features this model cannot reproduce
- Negative amortization
- Rate-change timing
- Fees, taxes or insurance